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Too big to succeed? Implications of the Schwab-TD Ameritrade behemoth

The entire financial services industry has been upended following the announcement that Charles Schwab agreed to acquire TD Ameritrade Holdings in a massive $26 billion deal expected to close in the second half of 2020.

But if the deal, pending both regulatory and shareholder approval, goes through, RIAs look to take a particularly hard hit.

The RIA space has become a dominant force in the industry, in large part due to its ability to choose custodians from among a number of broker-dealers. Given the vast market control the combined firms would have, RIAs’ ability to provide flexible, customer-focused solutions would inevitably diminish. And the fallout will continue post-merger.

Once the firms combine, the transaction will create a broker-dealer powerhouse controlling $5 trillion in client assets, $24 million in brokerage accounts and comprising 51% of the BD market. RIAs, as well as those firms directly impacted by the transaction, will find it necessary to make major changes to their product-service mix, marketing and branding, as well as technology.

Next, consider this: bigger is not always better. Schwab announced that the new headquarters for the combined entity will be located at its new Westlake, Texas, campus. This creates a host of logistic, staffing and general office operation issues that will need to be remedied as the new office spaces are outfitted for service.

Additionally, the resources, technology and staff buy-in required to successfully integrate the two firms into one enormous entity is mind-boggling. The sheer volume of accounts and merging of client records and systems alone is daunting. Add to this the significant marketing investment that will be needed, both in terms of internal communications with staff, and also in external communications with clients such as television and print ads, and it becomes quite clear that the financial investment to bring the integration of both firms to fruition will be enormous.


With such a significant financial outlay by Schwab, to not only make the deal but to bring it over the finish line, it can easily be hypothesized that — at least at the outset — there will be cutbacks in other spending. In the BD space, this usually means less money spent on innovations in technology as well as support services for advisors. Ultimately, an impact to advisor services translates to less service for the client, which is the greatest potential downside of the Schwab-TD Ameritrade deal.

There is a reason antitrust laws exist: to prevent firms in industries which have a controlling interest in the economy from becoming too big, too fast, by simply buying their way to the top.

It will be interesting to see how things play out for Schwab and TD Ameritrade as they navigate the waters of shareholder and regulatory approval which lay ahead. These approvals are checks and balances exist to protect us all — financial services professionals and clients alike. One can only hope the right decision will be made this time.

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